Your finances: Life insurance policies need periodic checkups

To help ensure that you are making the right investment for your family's future, here are two common mistakes to avoid when buying life insurance:

Mistake 1: Thinking life insurance is a one-and-done purchase

As your journey through life evolves, you may experience life events that cause gaps in your coverage.

Many people fail to evaluate the effects of these changes on their life insurance needs.

For instance, a policy you purchased 10 years ago to protect your family might have been the best solution at the time.

However, in the past 10 years, you purchased a home, had a second child and became the sole breadwinner for your family.

If you do not review your life insurance needs, you may be leaving your family vulnerable.

Solution: Get periodic insurance reviews.

Going through a periodic insurance review with an insurance professional will uncover any changes in your insurance needs, and allow you to be confident that you are prepared no matter which road life's journey takes you down.

You should get an insurance review every three to five years, or whenever you have a "life-changing event" such as birth, death, marriage, divorce, a new mortgage or retirement.

Mistake 2: Not getting your actual life insurance policy reviewed

As life expectancy has increased, the cost of life insurance has decreased. Policies with premiums based on mortality tables from 1982 or before will be more expensive than policies with premiums based on the more recent 2001 mortality tables.

By getting your existing insurance policy reviewed, you could uncover opportunities to save money on premiums.

Insurance policy reviews can also uncover:

Policies that are not performing because they were based on interest rates that are unreasonable in today's economic environment; Term policies that are nearing the end of their term with premiums that will increase substantially.

Solution: Have your policy reviewed periodically.

Having your insurance policy reviewed will give you an understanding of how your policy is performing.

You might find out:

Your current policy is performing as intended; You can maintain the same level of insurance coverage with reduced premiums; You can increase your insurance coverage for the same premium payments; Your current policy is not performing as intended — and how you might address this.

By having periodic reviews of your life insurance needs, as well as your current policies, you will ensure your family is protected and prepared.

Laura Medigovich is a certified financial planner and vice president for M&T Bank's Hudson Valley region. The views expressed by the author are her own and are not endorsed by M&T Bank, M&T Securities or their affiliates.

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